Source: Xinhua Author: 01/08/2010
Subject Concerned: Government Airlines
Japan Airlines (JAL) may be declared bankrupt as early as Jan. 19 under a government plan to maximize transparency while restructuring the struggling company, according to local media on Jan. 8.
The government plan to seek bankruptcy for JAL will likely be opposed by private creditors, who are likely to want any restructuring plan to take place behind closed doors and away from public scrutiny.
"We are making arrangements with all parties with an emphasis on how to carry out drastic reform while making sure the airline continues to operate," Transport Minister Seiji Maehara said. He added that a decision not to do so now would likely cost the taxpayer more money in the long run.
JAL is currently working with the government-backed Enterprise Turnaround Initiative Corp. (ETIC) to keep its head above water in the aftermath of a global downturn.
The company has asked employees to accept a cut in pension benefits to ensure its survival, and needs to have the approval of two-thirds of its retirees by Jan. 12 on this matter. The government has asked the ETIC to ensure this plan goes ahead if it wins approval.
JAL is supported by the Sumitomo-Mitsui Banking Corporation, Mizuho Corporate Bank and the Bank of Tokyo-Mitsubishi UFJ, and all three, along with the airline, have opposed the idea of bankruptcy, arguing that it could lead to a worsening situation as the public image of the company deteriorates.
The government of the Democratic Party of Japan (DPJ), however, supports the bankruptcy option, which would be in line with a manifesto promise to bring more transparency to the way government matters are handled and public money is spent.
JAL suffered losses of 130 billion yen (US$1.4 billion) in the first half of the fiscal year, and refused to project figures for the second half of the year because of the precarious nature of its situation.
Two U.S. carriers, Delta Air Lines and American Airlines, have offered to help support any bailout of JAL in exchange for access to lucrative space on Asian runways currently controlled by the Japanese firm. Transport Minister Seiji Maehara said on Jan. 8, however, that any decision on a tie-up was not likely to be reached this month.